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Salesforce passes the $20 billion milestone; onwards to $50 billion with a new business operating model in play

Stuart Lauchlan Profile picture for user slauchlan February 26, 2021
Salesforce comfortably crashed through its long-standing revenue target. The next step is faster growth powered by a work from anywhere model, according to CEO Marc Benioff and team.

(Analyst calls COVID-style - (L-R Patterson, Taylor and Benioff )

Despite the inevitable distraction of a global pandemic, this was always going to be the year that Salesforce delivered on one of its biggest targets and became a $20 billion revenue company.

In the event, it passed that tipping point comfortably, turning in full year fiscal 2021 revenues of $21.25 billion, prompting CEO Marc Benioff to set out the next goal is $50 billion for fiscal year 2026: 

Basically we're going to double the company from where we are right now. That is doubling revenue in five years and we'll reach that milestone faster than any other enterprise software company. That would make Salesforce the second largest independent software company in the world

For Q4, Salesforce reported fourth-quarter earnings of $267 million, against a loss of $248 million in the same quarter a year ago, on revenue of $5.82 billion, up 20% year-on-year from $4.85 billion. In the quarter, Sales Cloud grew 11% to contribute $1.4 billion, Service Cloud 19% to $1.4 billion, Marketing and Commerce 27% to $900 million and Platform and Other was up 26% to $1.8 billion. 

Dog food time

“Eating its own dog food’ through using its own offerings has helped Salesforce deliver through the past year, said Benioff, enabling what he pitched as “a new business operating model - work from anywhere, direct trusted customer relationships”: 

I don't think we would have survived as a business without our Sales Cloud. It was critical to build those Business-to-Business relationships that are the essence of Salesforce, but that we had to do digitally. Sales Cloud enabled us to sell from anywhere…Of course we all love getting on the airplanes and flying somewhere and being in person with the customer, but it just hasn't been possible.

The other thing that wasn’t possible in 2020 was staging the annual Dreamforce gathering in San Francisco, usually the most crucial lead generation week of the year, in its normal form. But this year demanded a change of tack:

We have the ability to use our Marketing Cloud to have those direct digital relationships at scale. Instead of having 170,000 people take over San Francisco, we had more than 140 million views of just Dreamforce. That's amazing. We also created hundreds of other leadership events throughout the year for customers, employees, partners, communities and that generated another  350 million views.

And with Service Cloud, we managed our own case load as our business continued to accelerate through the year as we moved our call centers and contact centers into our employees' homes, with 4.8 billion interactions using our Service Cloud in the last quarter.

Customers have followed suit, he added, citing the likes of Zoom, Carrefour and Humana as users of Marketing Cloud, for example, and Gap, Sonos and Uber Eats who tapped into Service Cloud.

Opening virtual doors 

On the subject of C-suite access at such customers, the COVID crisis and the associated digital focus has made opening virtual doors easier, attested Chief Revenue Officer Gavin Patterson: 

The digital imperative is now a CEO priority. That's the overriding theme that we've seen over the last nine months. Previously, it might have been delegated down into the business, but it has become so important and so urgent that the CEO wants to take direct control over it. And that has been something we've been able to take advantage of. Coupled with the fact that video allows us to get to see [people]  faster and more frequently it means that the pipeline has been very strong.

The other trend of note has been a shift towards a different sort of C-level conversation, he added:

From my perspective, CEO/C-suite conversations around solutions, fundamentally they're not about products anymore…we're getting into more conversations with customers around outcome-based initiatives, where they want our services business to be involved as part of the design and there's a real focus on what are the outcomes and how we can underpin those. 

Going faster 

Chief Operating Officer Bret Taylor picked up the theme of digital acceleration that has become a familiar concept in recent months across the tech sector, tying it back to user adoption of Salesforce’s Einstein AI offering: 

We're seeing just incredible secular trends towards digital. I've heard a lot of CEOs talk about essentially ‘we did in a year what might have taken a decade before’ in terms of adoption of digital technology. And when all of your customer and your partner and your employee interactions are digital, Artificial Intelligence and Einstein can make every single one of those engagements more personal.  I'll just take Service Cloud as an example. Our digital service capability has grown at just unprecedented rates this year and with the adoption of things like chatbots powered by Einstein, we saw 91% quarter-over-quarter growth in chatbots alone.

All told it's been a year when everything changed in terms of how to conduct business, he added: 

If you had told me one-and-a-half years ago that we would execute this entire year without being in an office, without getting on an airplane, I would have said it was impossible. But we did do it and we did it without any notice. Every executive in every company, including ours, coming out of this is really asking the question, ‘What is the company we want to be on the other side of it?’. What sales meetings are we going to get on an airplane for? That contact center that used to be a building that is now something that exists in the cloud, are we going to go back to the building or just embrace the cloud? 

No going back

While the pandemic has been a catalyst for change, there’s no turning back now, he predicted, either for Salesforce as a company or for its customers, AKA: 

The people who have experienced all these digital trends, whether it's buy online, curbside pick-up, that direct-to-consumer trend in the consumer packaged goods industry, the move to telemedicine.

Benioff went further, arguing that the pandemic operating model might well come to be seen as something that could usefully have been implemented long ago: 

I've been surprised how many sales calls we've been able to make this year. If I could rewind history over the last 22 years, I would have enforced a much more significant digital discipline for our sales organization. I think that when we look back at all of the time and energy we spent physically getting on airplanes, getting in cars, going to people's offices, having a breakfast or a lunch or a dinner, waiting to try to make a C-level sales call, [then] when you look today at the level of access that you have in organizations to conduct B2B sales, I mean it's all [about] the capability when you're digitally-enabled - you can go anywhere, just much, much faster.

My take

A milestone revenue number passed, record sales and a bold new growth ambition laid Wall Street marked down the share price. It was ever thus. Investors, as seen with other cloud firms of late, were disappointed by what they saw as weaker guidance looking into fiscal 2022. There’s also potentially still some unease in play in some quarters about the high price of the planned Slack acquisition - $27.7 billion - although Benioff and Co pitched the potential upsides of the two firms coming together one more time with vigor on the post-results analyst conference call. 

What was interesting from that call was the repeated emphasis on this new business operating model, one that Salesforce has put into practice for itself throughout the COVID crisis. Patterson had alluded last year to the idea that more and more sales activity would be remote and it’s clear that this has worked for Salesforce to date. How that pans out in the emerging Vaccine Economy will one of the post-pandemic trends to track over the coming months and years. 

‘No going back!’ is an increasingly frequently heard declaration from ever more industry leaders (ignoring the likes of Goldman Sachs and its CEO’s ludicrous declaration of war on remote working!). But how that resolve is maintained as some kind of so-called ‘new normal’ takes shape will be interesting to observe. 

That said, so far, Salesforce has had the proverbial ‘good war’ when it comes to COVID. Onwards to $50 billion! 

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